President assures price band would be removed, say brokers

November 28, 2011, 7:50 pm
By Ravi Ladduwahetty

President Mahinda Rajapaksa has assured the members of the Colombo Stock Brokers Association (CSBA) that all the demands that they had put forward to him, including the removal of the price band, would be met in the near future, and that steps would be taken to bring back the exchange to where it was last year.

For several weeks the market has been falling largely due to credit issues.

President Rajapaksa, the Economic Development Minister and Secretary to both the Ministries of Finance and Planning and Economic Development Dr P.B. Jayasundera were supportive of the requests that the CSBA made, Colombo Stock Brokers Association Chairman Sriyan Gurusinghe told The Island Financial Review last night.

Some of the demands made by the brokers were: Allow the brokers credit three times the value of the net capital, the removal of the price band, increase the commercial bank lending on listed equity collateral from the current 5 percent to 7.5 percent and concessions for foreign broking companies to extend credit.

The association had requested the meeting to keep the President informed of what was happening in the capital market. "We also needed to keep him informed of what could happen in both the short and the medium term as well," Gurusinghe said.

The brokers had also told the President that there was no tangible reason for the market to decline in the wake of corporate earnings and profits rising by as much as 40 percent and that the inherent risks of lending capital was not there now.

They had also said that there was a need to review the Exchange Control Act in the context of some foreign stock brokers were not permitted to have margin trading in Sri Lanka. They had also touched upon the current rules for commercial banks lending to the Sri Lankan equities market.

" The President gave us a patient hearing and said that arrangements would be made for the market to be where it was prior to July 10, last year," Gurusinghe said.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=40013

Mahinda urges brokers to venture overseas, market post-warSri Lanka among foreigners; reach out and educate rural investors

Cautions against pump and dump, thereby avoid sharp pricefluctuations endangering innocent investors

Brokers say ASI dropping 2,000 points, PE down to 13 times from 26 create conducive environment for relaxed rules

The country’s beleaguered stockbrokers yesterday got what is perhaps a new lease of life after a two-hour engagement inclusive of lunch with President Mahinda Rajapaksa, a development described as unprecedented, given it being CSBA's first-ever interaction with a Head of State.

The Colombo Stock Brokers Association (CSBA) led by its President Sriyan Gurusinghe and CEOs of member firms, including top fund managers such as Asanga Seneviratne, had a positive interaction with the President, who was accompanied by Economic Development Minister Basil Rajapaksa, Secretary to the President Lalith Weeratunga, Secretary to Treasury Dr. P.B. Jayasundera, senior officials of the Central Bank and others.

The President had assured the brokers that their recommendations (six in all – see box) would be favourably considered and referred to relevant institutions (SEC and the CSE) for a final decision to achieve interest of all stakeholders.

“We had a very positive meeting with the President and we are very grateful to him for listening to our views on the current crisis faced by the Colombo stock market and priority recommendations to rectify the situation,” a delighted CSBA Chief Gurusinghe told the Daily FT yesterday. He said that President Rajapaksa gave a patient hearing as well as shared some of his insights along with his vision with regard to ensuring a vibrant capital market.

Minister Basil Rajapaksa and Dr. Jayasundera had also shared some of their views on the importance and challenges of the capital market. “I think the meeting saw emphasis from both sides that a vibrant capital market is important to the country, the Government, listed companies, brokers and investors,” Gurusinghe said.
“On our part, CSBA recommendations were aimed at immediately restoring confidence, which is key to the revival of the market,” he added.

President Rajapaksa had stressed that brokers must venture out to promote post-war rebounding Sri Lanka in the capital market overseas, thereby drawing more foreign investors whilst educating and encouraging new investors locally.
“You must drive the stock market internationally and locally. Expand your reach within Sri Lanka and outside and harness untapped money, thereby increasing the capital market’s contribution to the economy,” the President had said.

Appearing to be well-briefed or versed on some of the recent developments, the President had stressed that the market must avoid sharp volatility or price fluctuations so as to minimise losses of those who buy on the rise. “People’s money must be safeguarded,” the President had added, in an indirect reference to the pumping and dumping scenario.
The importance of more listings as well as investor education was also emphasised by the President, who is also the Minister of Finance and under whose purview the Securities and Exchange Commission functions.

Apart from Gurusinghe, several other CSBA members also spoke on the market’s crisis. President Rajapaksa and the team had been told that dwindling activity and the market’s downturn – symbolising loss or lack confidence – was despite sound macroeconomic fundamentals, impressive corporate earnings and attractive valuations. It was pointed out that the Price Earnings (PE) Ratio of the market had come down to 13 times from 26 times a year ago, whilst the ASI had dipped by 2,000 points.

These were among factors cited by brokers as to the right environment being in place for relaxed credit rules and removal of price bands with the replacement of circuit breakers for price discovery and transparency.
The impression conveyed by brokers was that the volatility or heat of the market was long gone and there was space in the market now to relax previously-required stringent rules. “What we asked from the President were things which we can control or by which we can improve the market on an urgent basis,” a broker told the Daily FT.

It was also pointed out that more firms were keen to list on the CSE, but the crisis had put their plans on hold, whilst the appetite for IPOs had come down too. On this, Dr. Jayasundera had chipped in saying IPOs had mostly drawn applications via bank guarantees but brokers had clarified that even if they were excluded, retail applications had absorbed the good IPOs.

Whilst brokers had said they welcomed good regulation, they had noted that the manner in which regulations were introduced, their timing and sequencing was important, rather than being rushed or implemented haphazardly.

The CSBA meeting with the President was hot on the heels of it having separate discussions with the CSE and the SEC. Gurusinghe said both institutions were informed about their planned meeting with the President whilst sharing some of the recommendations broadly.

At the meeting with the SEC last week, CSBA had requested an increase in the limit of broker credit exposure. The SEC Commissioners are scheduled to meet once again today to review and reconsider CSBA recommendations.
Though there are some reservations over the CSBA directly meeting the President without the intervention of either the SEC or the CSE, analysts said that President Rajapaksa would refer the brokers’ recommendations back to the SEC for consideration and take action accordingly.

http://www.ft.lk/2011/11/29/brokers-delighted-by-talk-lunch-with-president/

Great...At the end, interference from top of the State outlooks something better unless dirty hands spoil the table cloth again with a handful of corrupted politicians.
Many have been counting days for rationale return on their investments in a well structured & protected market. Everyone understands market is not a ever green place & mixed with reds....
We are watching carefully what will be the news & how they react to the current issues....Good Luck

due to the political pressure all the unnecessary rules and regulations imposed after august 2010 , may be abolished in near future . markets should be run by demand and supply not the rules of regulators.

Trapeze without safety Net below

econ wrote:due to the political pressure all the unnecessary rules and regulations imposed after august 2010 , may be abolished in near future . markets should be run by demand and supply not the rules of regulators.

Yep no need of rules and regulations. Manipulators should be allowed to run freely. Let everyone take as much credit as possible. Let the broker generate money out of thin air.
No need of speed rules, road speeds should be on the drivers requirements.
Murder should depend on how murderer doesn't like the dead man.
Drugs should be freely available run by demand and supply.

aj wrote:

econ wrote:due to the political pressure all the unnecessary rules and regulations imposed after august 2010 , may be abolished in near future . markets should be run by demand and supply not the rules of regulators.

Yep no need of rules and regulations. Manipulators should be allowed to run freely. Let everyone take as much credit as possible. Let the broker generate money out of thin air.
No need of speed rules, road speeds should be on the drivers requirements.
Murder should depend on how murderer doesn't like the dead man.
Drugs should be freely available run by demand and supply.

AJ good one... every thing freely.. what a world ...